EPFO Ignored Govt Directive, Undermined SC Order on Higher PF Pension

A letter issued by the Ministry of Labour and Employment has revealed that the Employees’ Provident Fund Organisation (EPFO) ignored a central government directive and, in the process, weakened the implementation of the Supreme Court’s November two thousand twenty-two order on higher provident fund pension. The letter, dated May thirty-one, two thousand twenty-three, was sent by an Under Secretary in the Labour Ministry to the Central Provident Fund Commissioner. It states that the EPFO itself created procedural barriers that prevented employees and employers from contributing to the pension fund based on higher wages, despite clear directions from the government.

Labour Minister’s Direction on Pension Calculation Overlooked

According to the ministry’s communication, the Labour Minister had explicitly instructed that pensions should be calculated on the basis of the average salary of the last sixty months before retirement. However, the EPFO failed to operationalise this directive in practice. The letter points out that EPFO did not prescribe standard formats for employees and employers to apply for contributions on higher wages. It also failed to issue permissions at field offices, even while it continued to accept higher contributions in many cases. The communication notes that these procedural lapses were entirely avoidable and arose due to the organisation’s internal mismanagement rather than any legal or policy gap.

EPFO’s Own Lapses Became Grounds to Deny Higher Pension

The Labour Ministry, in strong language, observed that the present crisis around higher pension eligibility was a direct result of EPFO’s administrative failures. The letter states that EPFO is now citing these same lapses as reasons for rejecting claims for higher pension. The ministry described this as a major roadblock in implementing the Supreme Court’s directions, adding that employees who were otherwise eligible were being denied benefits due to avoidable technical shortcomings created by the organisation itself.

Circular Issued After May Two Thousand Twenty-Three Directive

Following the ministry’s intervention, EPFO issued a circular clarifying the method of pension calculation based on the date of joining the pension scheme. For employees who joined after September one, two thousand fourteen, pension is to be calculated on the average monthly pay of the last sixty months of contributory service. For those who joined before this date, the pension continues to be calculated on the average monthly pay of the last twelve months prior to exit.

Pro-Rata Method Led to Sharp Drop in Pension Amounts

Under the pro-rata method, service periods before and after September two thousand fourteen are calculated separately. This has resulted in a significant reduction in pension amounts for many members. The pension for the pre-two thousand fourteen period is now being calculated based on the salary level prevailing in two thousand fourteen, even for those who had contributed based on their actual higher salaries. As a result, thousands of retirees who had legitimately expected a higher pension have been adversely impacted.

Supreme Court Order on Higher Pension Effectively Diluted

The Supreme Court, in its November four, two thousand twenty-two judgment, had ruled that eligible members should be granted higher pension based on actual wages. However, the ministry’s letter reveals that the implementation remained stalled well into two thousand twenty-three. As per data presented by EPFO itself, around fifteen lakh ninety thousand four hundred seventy-three applications had been submitted for higher pension. Yet, until May two thousand twenty-three, not a single case had been declared eligible. Although the joint option process was later streamlined, the introduction of the pro-rata calculation mechanism effectively diluted both the government’s directive and the Supreme Court’s ruling.

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